This is an repost of an in-depth analysis of Iceland after the crisis 2008-2013:

Five years ago Iceland was the first European country to enter into a dramatic banking, currency and government debt crisis in the wake of the Lehmann shock. Since then the country made a tremendous comeback at least in public and political opinion. Suddenly Iceland is even seen as an example of crisis management and model for reforms.

"There was a time, it says in books, that the Icelandic people had only one national treasure: a common sense. It was taken away when men were sent to build the fairy castle"

But do these claims hold true and are they factual? Not everybody seems to agree as Cyrus Sanati who in a recent opinion column bluntly states the Icelandic time bomb is ticking again.

Now, Iceland is far away and a pretty small place. The banking sector today is purely domestic. So why should one bother? And if one should bother what are the implications of it?

The first question is easily answered. Yes one should bother because Iceland is a very good and straightforward example of the core elements of the current crisis still going on in Europe and political inability to deal with the real problems – debt levels -at hand. It is also a very interesting case since the size of the economy does not allow the related institutions like the central bank to employ monetary and debt measures to cover up structural problems.

The following essay addresses the open issues five years after the crisis in a systematic way starting with a subsumption of the post crisis measures, an analysis of still existing imbalances and taking a look at growth figures. A valuation is given in the end followed by a second part in about a week's time analyzing real reforms and innovation potential.

Results and valuation of Iceland's crisis and post-crisis reaction

The key for understanding the statement in the introduction is to realize that in the end the Icelandic crisis reaction has not been much different to the European one. While means where not available to undertake a bank bailout (Iceland did try to save e.g. Saga Capital and VBS), as a matter of fact, politicians interfered in economic matters trying to invert the crisis clearance. This is not to say that the private sector and its actors, partially criminal as it seems the case in Iceland, are to be whitewashed, but to show that the kind of status quo maintaining intervention did not solve the issues at hand.

About two years ago the Icelandic economic miracle became a nightmare. Since that a nation took a crash course in economics to understand what happened. Understandably anger, fear and despair about the situation led to a blame game and ideological clashes over neoliberalism and free market societies. In reality the crisis is about humans driven by greed taking decisions for which they did not have to bear the consequences themselves. But there is one good thing about human beings - they can change.